No respite from swelling trade gap seen

MANILA, Philippines — Barcelona-based think tank Focus Economics sees no respite from the swelling trade deficit hitting record levels amid soft global export market due to the US-China trade war and rising imports of capital equipment and raw materials to support the growing economy.

Lindsey Ice, economist at Focus Economics said the trade gap is seen widening to $46.3 billion this year and to $52.9 billion for 2020.

Ice said the country’s merchandise exports would increase by 1.9 percent, slower than the projected 3.6 percent growth in imports this year.

For 2020, Ice said exports growth would improve to 4.7 percent but imports would grow faster at 8.5 percent.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade gap narrowed by 15.5 percent to $3.39 billion in July.

Exports went up by 3.5 percent to $6.17 billion while imports contracted by 4.2 percent to $9.57 billion.

“Stronger growth in July was largely due to robust growth in agricultural sales, particularly for bananas, while exports of machinery and transport, gold – which is experiencing strong safe-haven demand – and electronic equipment and parts also grew at strong rates in the month,” Ice said.

Ice said shipments of electronic products, which account for more than half of total export revenue, slowed in July on weaker semiconductor exports.

Declines in chemicals and metal component exports also weighed on overall export growth.

Ice said imports continued to contract at the outset of the third quarter, falling 4.2 percent year-on-year in July, although this was a much weaker decline than June’s 10.4 percent drop.

“The contraction was driven by plunging imports of raw materials and intermediate goods, and purchases of foreign fuels and lubricants. However, consumer goods imports rebounded in the month, while imports of capital goods logged tepid growth in July after falling in June,” she said.

For the first seven months of the year, the country’s trade deficit narrowed by 4.1 percent to $22.2 billion.

Exports from January to July were steady at $40.39 billion while imports declined by 1.5 percent to $62.68 billion.